Joshua Gunter/The Plain DealerJim Haviland, executive director of MidTown Cleveland Inc., worries that the city's Midtown district is near a tipping point: Toward social services and subsidized housing and away from market-rate homes and private investment. Euclid Avenue, where Haviland poses at a bus stop, is at the heart of the district.

Herman Gibans Fodor Inc. ArchitectsCleveland Housing Network has purchased 1.3 acres in Midtown for an apartment building to house the homeless. The group argues that its project will look like any other apartment building, but stakeholders and property owners in Midtown worry that it will discourage additional private investment in the district.

CLEVELAND -- The remaking of Euclid Avenue was meant to lure billions of dollars in development to the corridor, replacing blight with homes, stores and businesses between downtown Cleveland and University Circle.

The $200 million Euclid Corridor transportation project certainly has spurred interest in Cleveland's Midtown district, which stretches from East 28th Street to East 79th Street, with Euclid running down the middle.

Between East 55th and East 79th streets, nonprofit community group MidTown Cleveland Inc. envisions a technology and health district, with biomedical start-ups, longtime businesses like Pierre's Ice Cream Co. and Gallucci's Italian Foods, expanded retail and new apartments and condominiums.

Early proposals in Midtown are taking a different shape, though, amid a crisis in commercial real estate lending and a recession that has quashed development. Now the community is trying to gauge how projects including a state mental hospital and affordable housing could shape the district's landscape -- a discussion that has produced tension and some harsh words between developers, public officials and stakeholders with different views.

RDL Architects Inc.Pirhl, a developer in Warrensville Heights, has proposed a senior housing project on Euclid Avenue near East 73rd Street. Nonprofit group MidTown Cleveland Inc. is opposing the project, saying it stands in the way of larger development and competes with another senior housing proposal nearby.

The hospital, an $84 million regional psychiatric facility envisioned for Euclid Avenue at East 55th Street, could bring 300 beds and 500 jobs. It would occupy one of Midtown's few large sites, roughly 7 acres once intended for a technology center, biomedical research, a state crime lab and a new 3rd District police station.

The hospital plan -- and smaller proposals for subsidized housing and apartments for the homeless -- has spurred debate among property owners, nonprofit groups and public officials about the future of the corridor.

These conversations, at times heated, aren't just about real estate. They're also about perceptions: That Midtown can't support market-rate housing. That the district is becoming a hub for social services. That a psychiatric hospital or housing for the homeless, regardless of the jobs or public services they provide, might drive private developers away.

City officials are aggressively vying for the hospital. Chris Warren, chief of regional development for Mayor Frank Jackson, said the project is a clear fit for a health-focused corridor and described concerns expressed by some real estate brokers and property owners as "unfair stigmatization."

MidTown Cleveland is cooperating with the city's efforts to win the hospital, but officials at the nonprofit group are opposing two residential proposals. And Jim Haviland, the group's executive director, worries that the district is near a tipping point: Toward social services and subsidized housing and away from market-rate homes and diverse projects.

"In Cleveland, we cannot afford to take what is readily available now at the stake of the appropriate development that may take some time," Haviland said. "And that's really the case here."

State hospital plans focus on tech site

Last spring, the state allocated $83.7 million for a new regional psychiatric hospital in Northeast Ohio. The hospital would replace a 180-bed facility in Sagamore Hills Township and a 100-bed hospital in Cleveland. It would provide short stays and long-term treatment for patients who check in voluntarily or are referredby the courts.

After considering four Cleveland sites, the Ohio Department of Mental Health homed in on Midtown, focusing on a site that the city, the state, MidTown Cleveland, foundations and developer John Ferchill spent five years and more than $4.5 million assembling for a technology center. The facility also could land on state-owned property in Highland Hills.

"This is not a done deal," Warren said. "We are hopeful, but we don't have a final agreement."

As the city and the state work to fit the hospital into an urban landscape, stakeholders in Midtown are trying to understand what the project means. Business owners, developers and real estate brokers welcome the prospect of 500 jobs -- people who potentially will shop, eat and live in the area. But stakeholders are concerned about how the hospital will be designed, and how it will fit into a district where planners want to create a Euclid Avenue bustling with pedestrians and businesses.

"It's proposed to go on our technology center site, and it's a long way from the technology we had in mind," said architect Paul Volpe, who worked on Midtown's master plans. "This could be something amazing, but I don't know enough about it to say whether the will and the way are there."

If the hospital takes the Midtown site, the community will need to cobble together a comparable property elsewhere, Haviland said. Though the Euclid corridor is peppered with vacant land and dilapidated buildings, there are few areas where enough property could be assembled and cleaned up for a technology park or other, large-scale development.

Beneath the relatively straightforward discussion about real estate, there are more private expressions of unease. Some nearby property owners said they don't have enough information to support or oppose the hospital. Others worried that the hospital will give private developers pause and make it hard to attract new businesses or residents to Midtown.

"It's time for people to be upfront if they have concerns," Warren said. "Let's talk about it. Bring them to us. But to say in secret, 'We're concerned because it's a mental health hospital,' to say that in whispered tones, just perpetuates the very bias that I would hope our community overcame a long time ago. It's not a good thing."

Master plan called for shops, condos

Near Euclid Avenue and East 75th Street, Midtown's master plan suggests stores and condos occupied by downtown and University Circle workers, medical residents and employees of biomedical startups.

That's where Cleveland Housing Network recently bought 1.3 acres, with designs to build what's known as permanent supportive housing. The nonprofit group's plans call for 70 apartments, for single men and women who have been living on the streets for a year or more. The building, the group's fifth such project, also would house counseling and support services for residents with mental illness or substance abuse problems.

CHN officials say their building -- a $12 million development that relies on state tax credits -- will meet a need in Midtown. The project, near other CHN properties that cater to families, the elderly and handicapped residents, will replace blighted property and will look no different than market-rate apartments, officials say.

Haviland opposes the project. He said Midtown, which has worked with CHN elsewhere, would support permanent supportive housing on a different site. Just not on Euclid Avenue.

"What this is, is a perpetuation of subsidized taxpayer projects that require additional support from tax dollars and foundations to sustain them," he said. "The city of Cleveland is going to notice that it is not generating the type of economic return as what our vision is. And it cuts into our ability to create the critical mass needed to change the dynamic on Euclid Avenue. That's the conflict."

Kate Monter Durban, assistant director at CHN, said the group respectfully disagrees with MidTown Cleveland.

"They're holding out for something that may not occur for a long time," she said.

Real estate broker Scott Garson, who bought the nearby Victory Building in 2005, said market-rate homes are possible along the corridor. His project, a rehabilitation of the building for 102 apartments, has been delayed by turmoil in real estate lending. But Garson and his business partners hope to wrap up their financing this fall and start construction soon after.

The CHN project won't stop him, but Garson worries that it will define the future of a largely undeveloped area and discourage additional private investment.

That's what worries Haviland. It's one reason MidTown Cleveland is opposing another plan: A $9.5 million senior housing project by Pirhl, a developer in Warrensville Heights. The project would comprise 48 apartments on Euclid Avenue, near East 73rd Street.

Haviland says Pirhl's proposal would break up another potential large site that could otherwise be used for biomedical and health-care development. And it directly competes with a proposal from the NRP Group, a Garfield Heights developer with plans to build 52 apartments for seniors next to the Dunham Tavern property. MidTown helped NRP choose a site and is supporting that project.

David Uram, a principal with Pirhl, said his development would replace two of the corridor's most-blighted buildings, the former Eton and Rugby apartments. "I know MidTown is opposing it, but it does seem to be sort of a question as to whether or not they're an objective observer here," he said.

The future of all three residential projects will be decided in July, when the state awards tax credits for affordable housing. The Ohio Housing Finance Agency has received 123 applications for credits. Officials expect to fund 30 to 40.

Private developers remain involved

Private development has not disappeared in Midtown.

Garson hopes to open the Victory Building by mid-2010. At the nearby Baker Electric building, developer Dick Pace has signed leases with enough startup businesses, medical spin-offs and other companies to fill roughly 60 percent of the former auto showroom. Five of those tenants will move in this summer.

Other local developers, including homebuilder Nathan Zaremba, the Geis brothers of Streetsboro and Ferchill, have been flirting with plans to replace vacant lots and empty buildings with slick new projects.

"I'm an optimist, so I believe there's quite a bit of development on the books and more coming," Pace said. "But I fully understand why MidTown wants to make sure they have a balance of projects coming online, not all one category."

Warren said the city also wants to see private investors spark business and residential development along Euclid Avenue. But analysts say the commercial real estate industry could take years to recover from this recession, hurting prospects for private development. Meanwhile, federal stimulus dollars and other pools of public money have kept financing somewhat more available for affordable housing and taxpayer-supported projects.

Volpe said the community's challenge is being cautious and thoughtful about development proposals, even during difficult times.

"Especially these days, there are those that may feel that anything is better than nothing," he said. "I have never felt that way. I just never feel that things are bad enough that we should take anything that comes along."

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